Global energy demand is growing rapidly, particularly in developing countries, along with economic growth. The strong growth in energy demand has led to higher levels of greenhouse gas emissions. The energy supply system and the relative prices of energy commodities are also crucial in determining the level of energy sector GHG emissions.

A good understanding of the drivers for the growth of emissions is essential in order to design effective policy instruments to curtail this growth. Some of these drivers include economic growth, energy intensity of the economy, and emission intensity of the energy supply system.

Our research aims to disentangle these drivers and quantify their roles in energy consumption and GHG emissions from energy demand sectors. The results help prioritize policy interventions to reduce GHG emissions from the economy.

Energy-intensive infrastructure may tie up fossil energy use and carbon emissions for a long time after investments, making the structure of such investments crucial for society. Much or most of the resulting carbon emissions can often be eliminated later, through a costly retrofit. This paper studies the simultaneous decision to invest in such infrastructure, and retrofit it later, in a model where future climate damages are uncertain and follow a geometric Brownian motion process with positive drift. It shows that greater uncertainty about climate cost (for given unconditional expected costs) then delays the retrofit decision by increasing the option value of waiting to invest. Higher energy intensity is also chosen for the initial infrastructure when uncertainty is greater. These decisions are efficient given that energy and carbon prices facing the decision maker are (globally) correct, but inefficient when they are lower, which is more typical. Greater uncertainty about future climate costs will then further increase lifetime carbon emissions from the infrastructure, related both to initial investments, and to too infrequent retrofits when this emissions level is already too high. An initially excessive climate gas emissions level is then likely to be worsened when volatility increases.

This paper critically reviews existing energy demand forecasting methodologies highlighting the methodological diversities and developments over the past four decades in order to investigate whether the existing energy demand models are appropriate for capturing the specific features of developing countries. The study finds that two types of approaches, econometric and end-use accounting, are used in the existing energy demand models. Although energy demand models have greatly evolved since the early 1970s, key issues such as the poor-rich and urban-rural divides, traditional energy resources, and differentiation between commercial and non-commercial energy commodities are often poorly reflected in these models. While the end-use energy accounting models with detailed sector representations produce more realistic projections compared with the econometric models, they still suffer from huge data deficiencies especially in developing countries. Development and maintenance of more detailed energy databases, further development of models to better reflect developing country context, and institutionalizing the modeling capacity in developing countries are the key requirements for energy demand modeling to deliver richer and more reliable input to policy formulation in developing countries.

This study examines the factors responsible for the growth of transport sector carbon dioxide emissions in 20 Latin American and Caribbean countries during 1980-2005 by decomposing the emissions growth into components associated with changes in fuel mix, modal shift, and economic growth, as well as changes in emission coefficients and transportation energy intensity. The key finding is that economic growth and the changes in transportation energy intensity are the main factors driving transport sector carbon dioxide emissions growth in the countries considered. The results imply that fiscal policy instruments---such as subsidies to clean fuels and clean vehicles---would be more effective in reducing emissions in countries where the economic activity effect is the primary driver for transport sector carbon dioxide emissions growth. By contrast, regulatory policy instruments---such as vehicle efficiency standards and vehicle occupancy standards---would be more effective in countries where the transportation energy intensity effect is the main driver of carbon dioxide emissions growth. Both fiscal and regulatory policy instruments would be useful in countries where both economic activity and transportation energy intensity effects are responsible for driving transport sector carbon dioxide emissions growth.

This paper estimates interfuel substitution elasticities in selected developing and industrialized economies at the national and sector levels. In doing so, it employs state-of-the-art techniques in microeconometrics, particularly the locally flexible normalized quadratic functional forms, and provides evidence consistent with neoclassical microeconomic theory. The results indicate that the interfuel substitution elasticities are consistently below unity, revealing the limited ability to substitute between major energy commodities (i.e., coal, oil, gas, and electricity). While the study finds some evidences of larger interfuel substitution potential in high-income economies as compared to that in the middle- and low-income economies in the industrial and transportation sectors, no such evidence is observed in the residential and electricity generation sectors or at the national level. The implication is that interfuel substitution depends on the structure of the economy, not the level of economic development. Moreover, a higher change in relative prices is needed to induce switching toward a lower carbon economy.

This study determines the factors responsible for the growth of transport sector CO2 emissions in 20 Latin American and Caribbean (LAC) countries during the 1980-2005 period by decomposing the emissions growth into components associated with changes in fuel mix (FM), modal shift and economic growth, as well as changes in emission coefficients (EC) and transportation energy intensity (EI). The key finding of the study is that economic growth and the changes in transportation EI are the principal factors driving transport sector CO2 emission growth in the countries considered. While economic growth is responsible for the increasing trend of transport sector CO2 emissions in Argentina, Brazil, Costa Rica, Peru and Uruguay, the transportation EI effect is driving CO2 emissions in Bolivia, the Caribbean, Cuba, Ecuador, Guatemala, Honduras, Other Latin America, Panama and Paraguay. Both economic activity (EA) and EI effects are found responsible for transport sector CO2 emissions growth in the rest of the Latin American countries. In order to limit CO2 emissions from the transportation sector in LAC countries, decoupling of the growth of CO2 emissions from economic growth is necessary; this can be done through policy instruments to promote fuel switching, modal shifting and reductions in transport sector EI.

This study analyze the potential factors influencing the growth of transport sector carbon dioxide (CO2) emissions in selected Asian countries during the 1980–2005 period by decomposing annual emissions growth into components representing changes in fuel mix, modal shift, per capita gross domestic product (GDP) and population, as well as changes in emission coefficients and transportation energy intensity. We find that changes in per capita GDP, population growth and transportation energy intensity are the main factors driving transport sector CO2 emission growth in the countries considered. While growth in per capita income and population are responsible for the increasing trend of transport sector CO2 emissions in China, India, Indonesia, Republic of Korea, Malaysia, Pakistan, Sri Lanka and Thailand; the decline of transportation energy intensity is driving CO2 emissions down in Mongolia. Per capita GDP, population and transportation energy intensity effects are all found responsible for transport sector CO2 emissions growth in Bangladesh, the Philippines and Vietnam. The study also reviews existing government policies to limit CO2 emissions growth, such as fiscal instruments, fuel economy standards and policies to encourage switching to less emission intensive fuels and transportation modes.